Performance-Based Pricing: A More Equitable Tool to Manage On-Street Parking

2016 may be the most exciting year for parking reform in Portland. In February, the City raised downtown meter rate to $2 per hour – first rate increase since 2009 – in hope to increase parking turnover in downtown. Three months ago, Portland City Council passed a resolution directing the Portland Bureau of Transportation (PBOT) to develop a performance-based parking pricing system to increase parking availability and manage on-street parking more efficiently. It is also worth mentioning that City Council decided to hold off on new minimum parking requirements in NW Portland after listening to testimonies from housing and transportation advocates and concerned residents at the public hearing on July 6. There will be more updates on parking minimums, but for now, let’s talk about performance-based parking pricing.

What Is Performance-Based Pricing?

Performance-based pricing, also known as demand-based or market-rate pricing, is a parking management tool that sets meter rates based on demand to achieve a target occupancy rate. Parking experts typically recommend 10 to 20 percent vacancy rate or 1 to 2 available spaces on any block to ensure drivers can always find a place to park near their destinations.

This video by the City of Seattle explains performance-based pricing. It is important to know that the primary purpose of performance-based pricing is managing parking availability and making finding parking easier, not raising new revenue.

The Question of Equity and Fairness

One question shared by people on both sides of performance-based pricing is “is charging previously free on-street parking based on demand an equitable policy?”

Commissioner Saltzman and Commissioner Fritz have publicly expressed concerns for such policy’s impact on low-income people. The concern for equity is what this article will explore.

Before we get deep into numbers and data, let’s first think about all the other costs people need to pay to own and operate a car. Most people do not think it is unfair to pay for gasoline, insurance, repairs, and the vehicle itself. Should we advocate for free gasoline for everyone so the cost of fuel does not burden poor people? What about food and housing? They are much more important to low-income households than free parking, but we don’t hear elected officials say we need to cap the prices of food so poor people can afford to eat. If people of all income levels have to pay rent for housing, why shouldn’t drivers pay rent for car storage?

Performance-Based Pricing Is More Equitable Than the Current Status Quo

To understand whether charging on-street parking is equitable, especially for low-income people, we need to compare it with the current status quo. For decades, cities have given away curb parking for free and required development to over-supply off-street parking to ensure free on-street parking availability. However, off-street parking is very expensive to build. According to a report by the Portland Bureau of Planning and Sustainability, on-site residential parking can cost as high as $55,000 per space to build. Therefore, parking requirements increase the cost of any development because it is difficult to recuperate the costs of building and operating off-street parking by charging market-rate prices when people can park at the curb for free.

Consequently, the costs of providing off-street parking are hidden in the goods and services we consume. Low-income households without cars now pay for the cost of parking indirectly in the form of higher rent, higher grocery costs, and higher prices for everything else. If a low-income household decides to save money by using transit or bicycling to get around, they shouldn’t have to pay for other people’s parking costs. In contrast, demand-based pricing is more equitable because it only charges drivers the cost of parking.

There are other factors other than price that affect choices about where to park, such as parking duration, the number of people in the car, and the value drivers place on saving time for any given trip. When curb parking is underpriced or free, parking is rationed on a first-come, first-serve basis, regardless of trip purpose, duration of stay, and willingness to pay. Conversely, demand-based pricing gives drivers the ability to decide where to park, how much time to save, and how much they are willing to pay based on trip-specific preferences and conditions. Performance-based pricing will make parking readily available to everyone; even poor people can choose to park in the best parking spaces on occasions when saving time is very important.

For older adults and people with disability, having the ability to park close to their destination would significantly reduce travel barriers and improve their access. When on-street parking is free or under-priced, older adults and people with disability must circle the blocks like everyone else and may have to park far away to find a parking space, even though they have greater needs to park as close to their destination as possible. Performance-based pricing gives people with greater needs the choice to pay to park at the best parking spaces to accommodate their needs and therefore is more fair than the current status quo.

Performance-based pricing is also more fair than charging a flat rate that does not vary based on demand or time of day. Why should you pay the same flat rate to park on blocks with lower usage as others who get to park on blocks that have high demand? Performance-based pricing offers drivers the option to save money by parking during times and areas of lower demand whereas the current flat rate pricing unfairly charges every driver the same price even when there are abundant on-street parking spaces.

What About Low-Income People?

Portland’s on-street parking rate is most expensive in downtown; currently at $2.00 per hour but free after 7 p.m. Any attempt to expand meter hours and/or price meters based on demand beyond 7 p.m. will likely cause concerns for low-income workers who work night-shifts in downtown. But how many downtown commuters are low-income?

In fact, very few low-income commuters actually drive to downtown. According to U.S. Census data reported by Bike Portland, only 5 percent of downtown commuters who drive to work earn below $30,000 annually while 83 percent are commuters who earn above $50,000 a year. Is our current parking policy equitable when it subsidizes car storage for commuters who are mostly not low-income?

As a direct response to stakeholder concerns about the impact of new downtown on-street parking rates on lower-income workers, PBOT provides a reduced-rate permit program for low-income workers to parking inside SmartPark garages between 3 p.m. and 7 a.m. for $35 a month. This program is much more effective and equitable in serving low-income workers’ transportation needs than free on-street parking.

A report using data from the 2009 National Household Transportation Survey (NHTS) shows individuals in poverty take 3 times more transit trips than those in the higher income groups. People below poverty level also have the greatest rate of bike trips and take walk trips about 50% more than their higher income counterparts. Moreover, data from the 2009 NHTS, show that households in urbanized areas earning below $30,000 a year are 7 times more likely to not own a car than households earning $30,000 or above annually. The poor are much less likely than wealthy to drive and park, and yet our current parking policy subsidizes free on-street parking for the wealthy and requires off-street parking that increases the costs of everything else.

Turning Small Change into Big Changes

Owning and operating a car is by far the costliest mode of transportation. In 2015, the average annual cost of owning and operating a car is about $8,700 according to AAA. That is a huge price tag for poor people! If elected officials are truly concerned about equity in transportation, they ought to give low-income people more access to more affordable transportation options, such as transit, biking, walking, and car share /ride share, and not continue to encourage driving by offering cheap parking.

In fact, performance-based pricing can improve transportation equity by shifting public subsidy from parking to affordable transportation options that poor people already use. Instead of going into the city’s general fund, new revenues from on-street parking can subsidize transit passes, bike-share / car-share / ride-share fees, expand transit services, and enhance sidewalks to ADA standards. By establishing parking benefit districts, the City of Portland can invest parking revenue right back into the area where it is collected to enhance low-income people’s mobility options so they do not have to be burdened by the high cost of automobility.

Equity Through Performance-Based Pricing

Parking is a political issue more than an economic one. Concerns for economic equity come from a good place and should be acknowledged. Evidence shows pricing parking based on demand is more equitable than the present parking policy. Free or under-priced parking forces everyone to pay for off-street parking indirectly, regardless if they drive, and rations on-street parking space based on luck, not an individual’s needs or preferences. On the other hand, performance-based pricing only charges drivers and gives people of all income-range the ability to choose the most desirable parking space based on trip-specific circumstances. Most importantly, it can reduce low-income people’s transportation costs by improving access to more affordable travel options such as walking, biking, transit, and car-share / ride-share.